- Fed Up 25 Basis Points, Bitcoin Down Over 6%
- A rebound in prices followed, as the market bet on the interest rate
- Bitcoin originally fell to $26,700 and is now back at $27,700
- Tight monetary policy appears to be coming to an end, which is exactly what Bitcoin investors want to hear
- The flip side is that Bitcoin’s reputation may have been tarnished by the chaos in the industry over the past year
- It remains to be seen if institutional money and Wall Street capital will trust cryptocurrencies again
As it has been for the past year now, bitcoin It continues to fluctuate widely from interest rate expectations.
The orange currency fell on Wednesday on the back of the latest Federal Open Market Committee meeting, where interest rates rose 25 basis points despite some analysts calling for a pause in the wake of banking turmoil in recent weeks.
Why did bitcoin fall?
Such was the chaos in the banking markets that before the meeting the markets held a real chance that interest rate hikes would not be any more.
Silicon Valley Bank (SVB) triggered the crisis that last week spilled over into Europe ahead of the stunning demise of Credit Suisse, the Swiss institution founded in 1856.
With deposits fleeing banks and markets reverberating, things were falling apart – as is usually the case when interest rates are raised in haste. And this last session was the fastest form of tightening in recent memory.
Bitcoin fell from $28,500 to $26,700 as the Fed announced a 25 basis point increase, down 6.3%.
However, Bitcoin has since recovered somewhat, trading at $27,600. This came as the market started to digest Fed Chair Jerome Powell’s rhetoric about the future path of interest rates.
While the rally came from yesterday, it is increasingly certain that monetary tightening is coming to an end. It should be noted that prior to the demise of SVB, this spike was virtually guaranteed to be 50 bps.
Looking at prices by the end of July, the market expects reductions rather than increases. So while the 25 basis point hike may have been hawkish, the language after that and the conclusion that came out of the meeting was quite the opposite.
Will bitcoin go up?
The question on everyone’s lips within cryptocurrency is, then, what does this mean for the Bitcoin price? As always, this question is difficult to answer, but there is no doubt that the future looks much brighter for the currency today than it did a few months ago, that is for sure.
Not only is it beyond that FTX Scandal And the wave of bankruptcies that followed the dirty collapse of the first-tier stock exchange, but the end seems to be near as far as tightening monetary policy is concerned.
Bitcoin was launched in 2009 and as such has never seen anything but a raging bull market in the broader economy. The S&P 500 increased sevenfold from the GFC’s rock bottom to its peak — and Bitcoin, along with tech stocks, rode the wave of low interest rates, a warm money printer, and an overall perfect climate.
But with the inflation rate soaring last year, this has been completely reversed. With interest rates skyrocketing, there was no way for Bitcoin to maintain its previous levels of buoyancy. I went down, and I fell hard.
Finally, the harsh monetary policy that dragged him through the gutter appears to be coming to an end. And while that doesn’t guarantee anything, it certainly removes the shackles so that there’s at least the possibility that it might arouse.
Is Bitcoin tarnished?
The other side of the argument is that the amount of damage over the past year has been so great that Bitcoin’s long-term path has been pinned, and it will not be able to hit the path itself.
Crypto winters have come and gone in the past, but this latest winter coincided, as we said, with a rout in the broader economy for the first time ever. This also came while Bitcoin was a major financial asset – something that was not true in previous cycles.
Meltdowns like FTX, LUNA, and Celsius have not only plundered capital from space, but also embarrassed Cryptocurrency is on the big stage, as it is unfair to the good players in the industry. Will institutional funds and trad-fi money be happy to trust cryptocurrency again?
It’s an interesting debate, and only time will tell.